Theresa May confirmed on Monday the government would set aside an extra £20.5bn a year for the health service by 2023.
Photograph: Will Oliver/EPA

Theresa May is prepared to tear up the Tories’ tax pledges from last year’s general election to pay for her NHS funding plans, as she comes under growing pressure to explain how she will find the money.

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Government sources signalled that planned cuts to corporation tax and a pledge to increase the personal income tax allowance to £12,500 a year by 2020 could both be ditched, as could a promise to lift the higher rate threshold to £50,000.

In a speech at the Royal Free hospital in London on Monday, with the chancellor, Philip Hammond, in the audience, the prime minister confirmed the government would set aside an extra £20.5bn a year for the health service by 2023.

She repeated her controversial suggestion that a “Brexit dividend” would meet part of the cost when the Treasury stopped paying EU contributions.

But May conceded tax rises were inevitable. “As a country, taxpayers will need to contribute a bit more,” she said. “But we will do that in a fair and balanced way. And we want to listen to people about how we do that, and the chancellor will bring forward the full set of proposals before the spending review.”

May said she would be asking NHS leaders to use the next few months to set out reform plans to match the new 10-year funding settlement and dropped a heavy hint that she would consider repealing some key aspects of the NHS changes carried out by Jeremy Hunt’s predecessor as health secretary Andrew Lansley.

May and her cabinet discussed the NHS funding settlement on Monday morning. Hammond warned colleagues that, with health the number one priority, there would be few spare resources for other departments in next spring’s spending review.

Ministers are likely to face repeated questions between now and Hammond’s autumn budget about where extra funds will come from, and whether fresh cuts will have to be made elsewhere.

The government’s independent forecaster, the Office for Budget Responsibility, whose data Hammond must base his spending plans on, said as recently as March that “the impact of Brexit on the public finances is complex and uncertain”.

There is also disagreement over how much the NHS can achieve with the money, given it was below the 4% rise that health thinktanks, the Office for Budget Responsibility and the Institute for Fiscal Studies (IFS) recommended.

Hunt insisted that the new money would be enough so that “the NHS can regain core performance [on key waiting time targets] and lay the foundations for service improvement”.

The NHS England chief executive, Simon Stevens, welcomed the deal despite having made clear since last November that the NHS needed to receive a rise of at least 4%.

“It represents a clear gear change in the amount of funding that will be available for the next five years, compared to what we have had over the last five years,” he told MPs on the public accounts committee.

Chris Hopson, the chief executive of NHS Providers, which represents NHS trusts in England, welcomed the cash injection, but warned it “will also still mean we face difficult choices on what our priorities should be.”

Speaking in the House of Commons on Tuesday, as Hunt presented more details of the plans, his Labour shadow, Jon Ashworth, said: “The PM should level with the British public and not take them for fools.”

The chancellor has insisted that rather than flex his fiscal rules and meet a large proportion of the cost of the NHS funding package through borrowing, everything is on the table, including scrapping election pledges made just 12 months ago.

His 2017 budget unravelled after a planned increase in national insurance contributions for self-employed workers was rejected by Conservative backbenchers because it breached a manifesto pledge.

But after last year’s snap general election returned a hung parliament, a number of other manifesto plans, including for an expansion of grammar schools, were ditched.

A spending review is not formally due until next spring and other ministers are concerned that by pre-announcing such a large increase for the NHS, the prime minister is running the risk that other causes, such as education and policing, will be squeezed.

“We are spending all the money there is, or can be, on the NHS. There won’t be any money for anything else. Obviously it’s a gamble,” one cabinet minister said.

The planned cuts to corporation tax would reduce it to 17% by 2020–d own from 28% when the Conservative-led coalition took power in 2010 – and were previously hailed by the chancellor as a way of showing that Britain was open for business despite Brexit. Cancelling them would raise about £5bn a year.

Carl Emmerson and Thomas Pope of the IFS said there were “no easy options” for funding the NHS package.

“Either other day-to-day departmental spending will be cut by even more – which won’t be easy after eight years of austerity – further social security cuts will be found, capital spending will be cut, taxes will be increased or the commitment to eliminate the deficit by the mid-2020s will effectively be abandoned,” they said.

NHS England’s budget will go up by 3.6% next year, rising from £115bn to £119bn, and then by the same percentage in 2020-21 to £123bn. It will then receive annual increases of 3.1%, 3.1% and 3.4%, taking its budget to an eventual £135bn in 2023-24.

May underlined her personal commitment to improving mental health services by pledging to bring in new waiting time targets for patients. “The new long-term plan must move us towards new clinically defined access standards for mental health that are as ambitious as those in physical healt,” she said.

She wants doctors and NHS leaders to advise Hunt on which of the NHS’s raft of targets should be kept, raising the possibility that some could be watered down to avoid political embarrassment.